In your personal life, you can face one-off or miscellaneous expenses that you may not have included in your regular budget.
This might include purchasing a birthday gift for a friend, making a small home repair, or buying items to support your hobby.
The same principle applies to business expenses. Though there are standard expenses you expect to incur to support your business, every company will encounter unforeseen expenses that must be properly accounted for.
In this guide, we’ll explain what miscellaneous expenses are and provide some common examples and best practices for managing them.
What are miscellaneous expenses?
Miscellaneous expenses are minor, one-off, irregular costs businesses incur. They can vary greatly between periods because they are generally not predictable.
They are a type of indirect expense that isn’t explicitly tied to the production of goods or services, such as labor, materials, or overhead.
As we will discuss in further detail below, miscellaneous expenses might consist of the purchase of a new office printer, a one-off marketing campaign, or fees paid to financial institutions.
Like any other type of expense, miscellaneous expenses result in a cash outflow for the business, which impacts its overall performance.
Thus, miscellaneous expenses must be tracked and categorized correctly to ensure accurate financial reporting and optimal business spending.
Miscellaneous expenses in accounting
Accountants refer to miscellaneous expenses as any expense that is non-recurring and outside of standard expense categories.
When recording the journal entries for miscellaneous expenses, there will be a debit to the miscellaneous expense account and a credit to the cash or accounts payable account, depending on the form of payment.
Miscellaneous expenses can be tax deductible if they are considered ordinary and necessary. So, claiming qualifying expenses at the end of the year can help a small business lower its taxable income.
Difference between categorized and miscellaneous expenses
Categorized expenses generally refer to the regular and recurring costs businesses incur to support operations.
As we mentioned above, this typically includes labor costs, materials, and overhead expenses that businesses have budgeted for a given quarter or year.
Any expenses that fall out of these defined categories are typically considered miscellaneous expenses.
Where do miscellaneous expenses belong?
Miscellaneous expenses are reported on a business’s income statement and are usually included in the “operating expenses” category as “general and administrative expenses” or simply “other expenses”.
Miscellaneous expenses are not shown on the balance sheet, as they are not ongoing assets or liabilities to the company.
Rather, they are reported during the period they’re incurred, impacting the entity’s bottom line.
Examples of miscellaneous expenses
Miscellaneous expenses are a broad category that consists of various types of business purchases.
To better understand what constitutes a miscellaneous expense, the following are some common examples businesses might encounter.
Office supplies
Purchases for office supplies like pens, paper, toner, kleenex, cleaning supplies, and others are miscellaneous expenses and are included on the income statement.
Incidental expenses
Unexpected or emergency expenses the business incurs can be classified as miscellaneous expenses.
This might include an emergency repair on a delivery truck, a broken window replacement at the office, carpet cleaning services if the business is flooded, and other expenses of this nature.
Small equipment
Small equipment purchases, like a computer mouse, desk lamp, calculators, and desktop shredders, can be classified as miscellaneous expenses.
Generally, computer purchases do not fall into the miscellaneous category of expenses, as they’re considered assets and depreciated if they’re above a certain value.
Advertising or marketing costs
Standard marketing activities will fall into a defined expense category. However, one-off advertising or marketing spend may be considered a miscellaneous expense.
This might include ordering new business cards or purchasing small promotional items for local events.
Work clothes
If you must purchase clothes or safety gear for work that cannot be used in your everyday life, their purchase can be considered a miscellaneous expense and written off.
This might include flame-resistant clothing, steel-toed boots, mechanic coveralls, costuming, or scrubs. In general, suits, formalwear, and other office attire are not included, as you could wear them elsewhere in your day-to-day life.
Financial services fees
Bank fees, wire transfer fees, overdraft fees, and any other fees paid to financial services providers are miscellaneous expenses.
They don’t directly support operations, though they are typically unavoidable and not a recurring expense that falls into a defined category.
Business travel
Costs incurred for business travel, like lodging, meals, and airfare, often fall into a defined expense category and directly support the business’s operations.
However, incidental travel costs, like parking fees or tolls, are unforeseen expenses and are considered miscellaneous expenses.
How to manage your miscellaneous expenses
To avoid misclassifying miscellaneous expenses and ensure compliance with accounting standards, here are some tips and best practices for managing them properly:
Include them in the budget
Even though miscellaneous expenses tend to be smaller, more minor purchases by nature, they can still add up and detract from a business’s profitability.
So, businesses can benefit from incorporating a cushion for miscellaneous expenses into the overall budget to avoid costly surprises that impact the bottom line.
Keep receipts for all purchases
It might go without saying, but you should collect and retain receipts for all purchases made with company funds.
Any employees with permission to use the business credit card or have their own assigned P-card should be instructed to do this as well.
Even if a purchase isn’t categorized as a miscellaneous expense in the end, it’s still important for your accountant to have a clear paper trail of all transactions.
This way, they can claim the maximum amount of deductions you’re entitled to, properly categorize expenses, and prepare accurate financial statements.
Monitor trends
Again, miscellaneous expenses can be unpredictable. However, it’s important to keep an eye on all spending to ensure you’re not overextending yourself.
Regularly review miscellaneous expense data to look for trends and find ways to optimize spend for better profitability.
You can use this data to make more precise budgeting decisions in the coming year and determine whether there are certain categories that need more detailed expense reporting.
Keep track of business spend and expenses with BILL
Miscellaneous expenses should be accurately tracked and accounted for, just as any other type of expense.
Their impact on business performance shouldn’t be overlooked, and you should resist overspending on miscellaneous expenses, even though they tend to be minor and non-recurring.
With BILL Spend & Expense, you can have more control over your budgets and gain visibility into transactions as they occur.
The platform helps streamline expense management, allowing you to automatically categorize transactions and sync data to your accounting system in real time.
Request a demo of BILL today to see how it can help you automate expense reporting and mitigate the risk of overspending.
Frequently Asked Questions (FAQs)
Is miscellaneous a direct expense?
No, miscellaneous expenses are indirect expenses, not direct expenses. They support a business’s operations, though they aren’t required for the direct production of products or services.
Is miscellaneous expense a fixed or variable cost?
Miscellaneous expenses are variable costs, because they are unpredictable and vary from month to month.
Are miscellaneous expenses tax deductibles?
Yes, many miscellaneous expenses can be tax deductible if they are considered necessary and ordinary.
